2024 has seen some crazy bullish runs for crypto assets with Bitcoin (BTC), Solana (SOL), Bonk (BONK), and several others making a name for themselves.
However, in the last few weeks, a not-so-quiet bearish signal has emerged, stirring fear in the hearts of short-term and long-term investors. Now, the important question is: Is it time to worry about crypto prices falling? Let’s find out!
Price Performance of the Largest Crypto Assets as Bearish Signals Kick In
The recent unstable crypto market and its price volatility have made investors anxious. The Bitcoin price — after the sharp peak of $73,798 in mid-March — has experienced a tremendous drop. Bitcoin is currently trading at roughly $60,870. While this is lower than the $68,990 high set in November 2021, BTC still surpasses the current low of $45,000 set in June 2022.
The fact that Bitcoin is far ahead of the initial gains of the year should also be taken into account. Although there was an immediate decrease in price last week, Bitcoin is by far above the $49,000 level it fell to when the Bitcoin ETF was first launched. The bounce is therefore equal to 120%, reflecting the currency’s growth potential in 12 months.
Ethereum (ETH) slid and landed under $3,000 today. This fall brings it further away from its recent top when the cryptocurrency enjoyed its glory after two years of struggles. In March, Ethereum cleared the $4,000 mark — the first time since March 2022.
Even if it has a strong 2024, Ethereum is lagging on its past and ETH is still short of its 2021 peak days. Presently, ETH’s price is relatively low in comparison to its December 2021 levels, and it has a long way to go to reach the all-time high of over $4,800, which it attained in November of 2021.
The decline in Ethereum could be linked to a more general pattern. Bitcoin’s latest price movement has become a cause of concern for the crypto sector, as most major altcoins also slid in value.
Understanding Investors’ Fear as Crypto Asset Prices Fall
Investors are worried about the recent price swings and this is due to some degree of fear and uncertainty in the market:
- Volatility and Uncertainty: The sharp fluctuations observed in the crypto market mean that it is very difficult to predict the future rate of return. This unpredictability can be one of the main factors of anxiety for investors.
- Loss Aversion: Behavioral finance draws attention to the fact that people become more upset by losses than they are exhilarated by gains. Even a small price reduction can make it feel like a big stumbling block.
- FOMO vs. Regret: With panic about being left behind during an upcoming price rise, investors are often the ones making rash buys at the peak. In contrast, the emotional factor of regret can influence traders to sell very fast in loss-making downturns. The need to maintain a balance between these opposing emotions will always remain a major challenge for making rational investment decisions.
- Market Contagion: Often, the robust price fall in any leading cryptocurrency, as is the case of Bitcoin, arises as a follow-up effect of other crypto assets prices turning downwards too. This influence of a major altcoin’s performance on other tokens can bring fear to the minds of an investor who is observing it for the first time.
How to Navigate Crypto Price Falls as an Investor
Recent price fluctuations within the cryptocurrency market have understandably caused concern among investors. The inherent volatility of this asset class can be unsettling, prompting questions about appropriate investment strategies. What do you do as an investor seeking promising investments?
- Maintain Composure: Panic selling during periods of market volatility is rarely a sound financial decision. Investors are encouraged to maintain a level head and revisit their established investment plan.
- Risk Tolerance Reassessment: Cryptocurrency investments are inherently risky. Investors should critically evaluate their own risk tolerance and adjust portfolio allocations accordingly. Those with a lower risk appetite may need to reduce their exposure to this asset class.
- Long-Term Perspective: The cryptocurrency market remains relatively young. Investors with a long-term outlook may view price dips as potential buying opportunities, particularly for well-researched projects with strong fundamentals and a clear development roadmap. However, it’s crucial to acknowledge that long-term investment horizons do not guarantee profitability.
- Rigorous Research: Investment decisions based on market hype or herd mentality are unlikely to yield positive results. Investors should conduct thorough research into specific projects, evaluating their underlying technology, development teams, and long-term potential.
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